Don't even consider investing in AIRLINES THEME now, it is a volatile investment

Airlines delivered massive losses today. It returned +1.59% to close at 945.618. It's recent 5 day performance has been -2.33%, -0.6%, -1.99%, +0.66% and +1.15%.

[Theme constituents]

~AIRLINES showed a down trend over the last 3 months. During this period ~AIRLINES lost -4.34% and saw a maximum drawdown of -12.84%. It has been unusually choppy during this period. Long term investors are better off avoiding investing in ~AIRLINES till volatility reduces and a clear trend emerges.

Trend

Monthly Performance

Alpha (outperformance)

Heatmap

Volatility

Return distribution

~AIRLINES has been outperforming the SP500 index in recent time. Over the last 1 year 8 months and 7 days, ~AIRLINES underperformed the SP500 index on 49% days. Which indicates that on days ~AIRLINES underperforms the SP500 index, it's performance is marginally worse than on the days it outperforms the SP500 index.

During the last three months ~AIRLINES delivered profits on 50% days. However, it still managed to end this period in a loss. It's best return during this period (of +3.67%) was on Thursday, 1 Nov, 2018. While it's worst loss in the same period (of -4.85%) was on Friday, 7 Dec, 2018. There was initially a bullish trend during this period which started on 30 Oct, 2018 and went on till 5 Nov, 2018. The bullish trend returned +8.85% to investors. This was followed by a bearish trend that started on 3 Dec, 2018 and ended on 10 Dec, 2018. This bearish trend lost -10.39% of investor capital.

~AIRLINES had 4 profitable and 8 loss making months over the last year. During the last year, ~AIRLINES underperformed SP500 index on monthly return basis. ~AIRLINES significantly outperformed SP500 index in Nov 2018, when it returned +12.23% compared to +4.75% returned by SP500 index during it's best month in the last one year - Jan 2018. ~AIRLINES had a longer winning streak of losing months than SP500 index. It went down in 5 straight months (from Feb 2018 to Jun 2018) during which period it delivered -19.74%. It is interesting to note that both ~AIRLINES and SP500 index significantly outperform during months when quarterly/annual results are announced.

Here's my gift-giving rule: Respect your current financial situation.
-- Suze Orman

~AIRLINES is becoming more volatile overall. In comparison, the SP500 index is seeing a rise in volatility. During the last three months, there was a significant surge in ~AIRLINES's volatility from 20 Sep, 2018 to 7 Dec, 2018. While there was a significant surge in the SP500 index's volatility from 19 Sep, 2018 to 29 Oct, 2018.

Advanced/professional short-term investors should note that ~AIRLINES has positive skewness in it's return distribution. This indicates that investors can expect ~AIRLINES to make attempts to recover from drawdowns quickly. Which makes ~AIRLINES a good candidate for momentum based trading on short-term bullish trends or counter-trends.

~AIRLINES has more chance of extreme outcomes than the SP500 index. Therefore, ~AIRLINES must receive a lower allocation than SP500 in your portfolio. SP500 index usually has shorter drawdown period than ~AIRLINES.

On a general note (since you are interested in ~AIRLINES), three instruments that have performed similar to ~AIRLINES are LTC, CASY and TEF. They must all be evaluated as alternative investment options and for diversification.